As an investor, make sure that the numbers work for you. Read on to find out more about typical income and expense scenarios for Outer Banks vacation rental property.

Income
The gross annual rental income for Outer Banks homes can range from more than $200,000 to less than $10,000.

Number of Weeks Rented
For all vacation homes, income is dependent upon the number of weeks for which a home is rented. A number of factors determine how well a house rents including weekly rates, the home’s location and the home’s desirability. Generally, if a property is renting for more than 15 or 20 weeks a year, it is doing well. Some very popular houses (usually oceanfront) will rent up to 30 or more weeks each year.

Many owners use their home personally only in the fall and spring. By avoiding using their home during the prime summer weeks, the property generates more income.

Weekly Rates
Your rental management company is the best source for accurate pricing information. They should have access to an array of raw data and keep abreast of market trends daily. The management company usually receives a portion of the gross rent—they want the house to generate as much income as possible.

Pricing varies depending on the season and expected demand. The range is wide—I have seen every thing from $300/week to over $15,000/week.

Advance Rent Distribution
Many Outer Banks homes will be booked for up to a year in advance and it is not uncommon for guests to be required to send large deposits to hold their reservations.
The accepted practice on the Outer Banks is to give the owners up to half of all income collected before a visitor arrives. For many owners, this means that disbursement checks for advance rent begin arriving at the beginning of February.

Expenses

Taxes
North Carolina property taxes are surprisingly low when compared to other areas in the country. The tax is based on the assessed value of the home and the tax rate for the town. A home with a market value of $700,000 may pay anywhere between $1000 to $2000 annually (depending on the assessed value and town).

Your buyer’s agent should determine the previous year’s tax bill for any home that you consider purchasing.

Insurance
There are generally three types of insurance policies for homes on the Outer Banks: hazard insurance, wind (hurricane) insurance, and flood insurance. Rates vary widely depending on coverage, home and location.

Property Management Fee
Property managers usually collect between 15% to 22% of a home’s gross income for their services. When you consider that the property management company advertises, books reservations, collects rent, prepares the house before guests check-in, coordinates the completion of minor maintenance issues, and cleans the home afterwards, the rates are reasonable.

Utilities
Electric, water, cable, telephone, and gas bills are paid by homeowners. Gas bills for heated pools are usually offset by “heated pool fees.” Homes that are on central sewage systems also pay for that service

Association Fees
Many communities require contributions which may cover maintenance of community amenities. Fees are based on the level of service provided. A community with ocean access may ask for a voluntary contribution of $50. Upscale neighborhoods with trolleys, multiple pool complexes and manicured common areas may charge $4500 or more annually.

Vendors
Homes with pools and hot tubs must be serviced each week for cleaning and inspection. Your cost will vary depending on the pool, vendor, and services provided. I usually budget $2000-2500 annually for this service.

Some homeowners may have annual contracts with pest controllers, HVAC specialist or others to provide services to their homes. Most Outer Banks homes are serviced by septic systems. We recommend having your system checked annually ($100-200) if you rent your home regularly.

This article provides general background information about typical income and expenses of Outer Banks vacation rental properties. The information is subject to change and is not guaranteed or all-inclusive. For more information please call or e-mail one of our helpful real estate agents.

Written by Gray Berryman, BROKER, ABR®, REALTOR®